ON Semiconductor Corporation ("onsemi") (Nasdaq: ON) today
announced results for the third quarter of 2021 with the following
highlights:
- Record revenue of $1,742.1 million, an increase of 32 percent
year-over-year
- GAAP diluted earnings per share of $0.70 as compared to $0.38
in the quarter a year ago
- Record non-GAAP diluted earnings per share of $0.87 as compared
to $0.27 in the quarter a year ago
- GAAP gross margin of 41.4 percent increased 310 basis points
quarter-over-quarter and 790 basis points year-over-year
- Non-GAAP gross margin of 41.5 percent increased 310 basis
points quarter-over-quarter and 800 basis points
year-over-year
- Record GAAP operating margin of 22.9 percent increased 600
basis points quarter-over-quarter and 1,390 basis point
year-over-year
- Record non-GAAP operating margin of 24.5 percent increased 490
basis points quarter-over-quarter and 1,250 basis points
year-over-year
- Free cash flow of $355.7 million or 20.4 percent of
revenue
“We delivered another quarter of record results driven by
on-going execution of our new strategy with demand remaining strong
for our intelligent power and sensing solutions in the automotive
and industrial end-markets. We continue to execute our margin
expansions plans which drove 310 basis points of non-GAAP gross
margin improvement quarter-over-quarter. With a rapidly expanding
design-win funnel for disruptive applications such as electric
vehicles, ADAS, industrial automation, and alternative energy,
coupled with ongoing transformational changes, we are making
sustainable progress towards our target financial model,” said
Hassane El-Khoury, president and CEO of onsemi.
Selected financial results for the
quarter are shown below with comparable periods:
GAAP
Non-GAAP
(in millions, except per share
data)
Q3 2021
Q2 2021
Q3 2020
Q3 2021
Q2 2021
Q3 2020
Revenue
$1,742.1
$1,669.9
$1,317.3
$1,742.1
$1,669.9
$1,317.3
Gross Margin
41.4 %
38.3 %
33.5 %
41.5 %
38.4 %
33.5 %
Operating Margin
22.9 %
16.9 %
9.0 %
24.5 %
19.6 %
12.0 %
Net Income attributable to onsemi
$309.7
$184.1
$160.6
$380.3
$275.8
$111.8
Diluted Earnings Per Share
$0.70
$0.42
$0.38
$0.87
$0.63
$0.27
Revenue Summary
($ in millions)
(Unaudited)
Three Months Ended
Business Segment
Q3 2021
Q2 2021
Q3 2020
Sequential Change
Year over Year Change
PSG
$
892.1
$
846.6
$
647.4
5
%
38
%
ASG
613.5
607.6
494.6
1
%
24
%
ISG
236.5
215.7
175.3
10
%
35
%
Total
$
1,742.1
$
1,669.9
$
1,317.3
4
%
32
%
FOURTH QUARTER 2021 OUTLOOK
The following table outlines onsemi's projected fourth quarter
of 2021 GAAP and non-GAAP outlook.
Total onsemi GAAP
Special Items ***
Total onsemi Non-GAAP****
Revenue
$1,740 to $1,840 million
$1,740 to $1,840 million
Gross Margin
41.8% to 43.8%
0.2%
42.0% to 44.0%
Operating Expenses
$338 to $356 million
$40 to $43 million
$298 to $313 million
Other Income and Expense (including
interest expense), net
$31 to $34 million
$7 million*
$24 to $27 million
Diluted Earnings Per Share
$0.67 to $0.78
$0.22 to $ 0.23
$0.89 to $1.01
Diluted Shares Outstanding **
442 million
5 million
437 million
*
Convertible Notes, Non-cash interest
expense is calculated pursuant to FASB's Accounting Standards
Codification Topic 470: Debt.
**
Diluted shares outstanding can vary as a
result of, among other things, the actual exercise of options or
vesting of restricted stock units, the incremental dilutive shares
from the Company's convertible senior subordinated notes, and the
repurchase or the issuance of stock or convertible notes or the
sale of treasury shares. In periods when the quarterly average
stock price per share exceeds $20.72 for the 1.625% Notes and
$52.97 for the 0% Notes, the non-GAAP diluted share count and
non-GAAP net income per share include the anti-dilutive impact of
the Company’s hedge transactions issued concurrently with the
1.625% Notes and the 0% Notes, respectively. At an average stock
price per share between $20.72 and $30.70 for the 1.625% Notes and
$52.97 and $74.34 for the 0% Notes, the hedging activity offsets
the potentially dilutive effect of the 1.625% Notes and 0% Notes,
respectively. In periods when the quarterly average stock price
exceeds $30.70 for the 1.625% Notes, and $74.34 for the 0% Notes,
the dilutive impact of the warrants issued concurrently with such
notes are included in the diluted shares outstanding. Both GAAP and
non-GAAP diluted share counts are based on the Company’s stock
price as of October 1, 2021.
***
Special items may include: amortization of
acquisition-related intangibles; expensing of appraised inventory
fair market value step-up; non-recurring facility costs, purchased
in-process research and development expenses; restructuring, asset
impairments and other, net; goodwill impairment charges; gains and
losses on debt prepayment; non-cash interest expense; actuarial
(gains) losses on pension plans and other pension benefits; and
certain other special items, as necessary. These special items are
out of our control and could change significantly from period to
period. As a result, we are not able to reasonably estimate and
separately present the individual impact or probable significance
of these special items, and we are similarly unable to provide a
reconciliation of the non-GAAP measures. The reconciliation that is
unavailable would include a forward-looking income statement,
balance sheet and statement of cash flows in accordance with GAAP.
For this reason, we use a projected range of the aggregate amount
of special items in order to calculate our projected non-GAAP
operating expense outlook.
****
We believe these non-GAAP measures provide
important supplemental information to investors. We use these
measures, together with GAAP measures, for internal managerial
purposes and as a means to evaluate period-to-period comparisons.
However, we do not, and you should not, rely on non-GAAP financial
measures alone as measures of our performance. We believe that
non-GAAP financial measures reflect an additional way of viewing
aspects of our operations that, when taken together with GAAP
results and the reconciliations to corresponding GAAP financial
measures that we also provide in our releases, provide a more
complete understanding of factors and trends affecting our
business. Because non-GAAP financial measures are not standardized,
it may not be possible to compare these financial measures with
other companies' non-GAAP financial measures, even if they have
similar names.
TELECONFERENCE
onsemi will host a conference call for the financial community
at 9 a.m. Eastern Daylight Time (EDT) on November 1, 2021 to
discuss this announcement and onsemi’s 2021 third quarter results.
The Company will also provide a real-time audio webcast of the
teleconference on the Investor Relations page of its website at
http://www.onsemi.com. The webcast
replay will be available at this site approximately one hour
following the live broadcast and will continue to be available for
approximately 30 days following the conference call. Investors and
interested parties can also access the conference call via
telephone by dialing (888) 414-4458 (U.S./Canada) or: (646)
960-0166 (International). In order to join this conference call,
you will be required to provide the Conference ID Number – which is
8631312.
About onsemi
onsemi (Nasdaq: ON) is driving disruptive innovations to help
build a better future. With a focus on automotive and industrial
end-markets, the company is accelerating change in megatrends such
as vehicle electrification and safety, sustainable energy grids,
industrial automation, and 5G and cloud infrastructure. With a
highly differentiated and innovative product portfolio, onsemi
creates intelligent power and sensing technologies that solve the
world’s most complex challenges and leads the way in creating a
safer, cleaner, and smarter world.
onsemi, and the onsemi logo are registered trademarks of
Semiconductor Components Industries, LLC. All other brand and
product names appearing in this document are registered trademarks
or trademarks of their respective holders. Although the Company
references its website in this news release, information on the
website is not to be incorporated herein.
This document includes “forward-looking statements,” as that
term is defined in Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical facts,
included or incorporated in this document could be deemed
forward-looking statements, particularly statements about the
future financial performance of onsemi, including financial
guidance for the year ending December 31, 2021. Forward-looking
statements are often characterized by the use of words such as
“believes,” “estimates,” “expects,” “projects,” “may,” “will,”
“intends,” “plans” or “anticipates” or by discussions of strategy,
plans or intentions. All forward-looking statements in this
document are made based on our current expectations, forecasts,
estimates and assumptions and involve risks, uncertainties and
other factors that could cause results or events to differ
materially from those expressed in the forward-looking statements.
Certain factors that could affect our future results or events are
described under Part I, Item 1A “Risk Factors” in the 2020 Annual
Report on Form 10-K filed with the Securities and Exchange
Commission (“SEC”) on February 16, 2021 (the “2020 Form 10-K”) and
from time to time in our other SEC reports. Readers are cautioned
not to place undue reliance on forward-looking statements. We
assume no obligation to update such information, except as may be
required by law. You should carefully consider the trends, risks
and uncertainties described in this document, our 2020 Form 10-K
and subsequent reports filed with or furnished to the SEC before
making any investment decision with respect to our securities. If
any of these trends, risks or uncertainties actually occurs or
continues, our business, financial condition or operating results
could be materially adversely affected, the trading prices of our
securities could decline, and you could lose all or part of your
investment. All forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their
entirety by this cautionary statement.
ON SEMICONDUCTOR
CORPORATION
UNAUDITED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in millions, except per share
data)
Quarters Ended
Nine Months Ended
October 1, 2021
July 2, 2021
October 2, 2020
October 1, 2021
October 2, 2020
Revenue
$
1,742.1
$
1,669.9
$
1,317.3
$
4,893.7
$
3,808.7
Cost of revenue (exclusive of amortization
shown below)
1,021.3
1,029.8
876.1
3,011.6
2,590.5
Gross profit
720.8
640.1
441.2
1,882.1
1,218.2
Gross margin
41.4
%
38.3
%
33.5
%
38.5
%
32.0
%
Operating expenses:
Research and development
154.5
166.3
156.1
494.4
483.2
Selling and marketing
68.4
76.1
65.3
223.4
207.7
General and administrative
75.7
73.2
62.2
221.3
196.3
Amortization of acquisition-related
intangible assets
24.7
24.8
29.6
74.5
91.0
Restructuring, asset impairments and other
charges, net
(1.7
)
17.5
9.0
58.3
58.0
Intangible asset impairment
—
—
—
2.9
1.3
Total operating expenses
321.6
357.9
322.2
1,074.8
1,037.5
Operating income
399.2
282.2
119.0
807.3
180.7
Other income (expense), net:
Interest expense
(31.9
)
(33.1
)
(42.2
)
(98.4
)
(126.6
)
Interest income
0.5
0.2
0.9
1.1
4.3
Loss on debt refinancing and
prepayment
—
(26.2
)
—
(26.2
)
—
Gain on divestiture of business
10.2
—
—
10.2
—
Other income (expense)
(5.8
)
(1.1
)
0.4
(2.4
)
(2.3
)
Other income (expense), net
(27.0
)
(60.2
)
(40.9
)
(115.7
)
(124.6
)
Income before income taxes
372.2
222.0
78.1
691.6
56.1
Income tax (provision) benefit
(61.8
)
(37.9
)
83.1
(106.8
)
90.5
Net income
310.4
184.1
161.2
584.8
146.6
Less: Net income attributable to
non-controlling interest
(0.7
)
—
(0.6
)
(1.1
)
(1.4
)
Net income attributable to ON
Semiconductor Corporation
$
309.7
$
184.1
$
160.6
$
583.7
$
145.2
Net income per common share attributable
to ON Semiconductor Corporation:
Basic
$
0.72
$
0.43
$
0.39
$
1.38
$
0.35
Diluted
$
0.70
$
0.42
$
0.38
$
1.32
$
0.35
Weighted average common shares
outstanding:
Basic
430.6
427.7
410.8
423.8
410.5
Diluted
440.7
443.6
418.3
443.1
414.4
ON SEMICONDUCTOR
CORPORATION
UNAUDITED CONSOLIDATED BALANCE
SHEETS
(in millions)
October 1, 2021
July 2, 2021
December 31, 2020
Assets
Cash and cash equivalents
$
1,389.2
$
1,091.1
$
1,080.7
Receivables, net
720.0
669.1
676.0
Inventories
1,327.6
1,309.3
1,251.4
Other current assets
205.0
160.4
176.0
Total current assets
3,641.8
3,229.9
3,184.1
Property, plant and equipment, net
2,427.8
2,457.8
2,512.3
Goodwill
1,662.7
1,663.4
1,663.4
Intangible assets, net
390.3
416.3
469.0
Deferred tax assets
382.1
429.9
429.0
Other assets
436.0
397.1
410.2
Total assets
$
8,940.7
$
8,594.4
$
8,668.0
Liabilities, Non-Controlling Interest
and Stockholders’ Equity
Accounts payable
$
599.3
$
610.2
$
572.9
Accrued expenses and other current
liabilities
641.8
643.6
570.0
Current portion of long-term debt
203.0
201.3
531.6
Total current liabilities
1,444.1
1,455.1
1,674.5
Long-term debt
2,910.5
2,907.1
2,959.7
Deferred tax liabilities
46.8
49.8
57.3
Other long-term liabilities
394.9
378.0
418.4
Total liabilities
4,796.3
4,790.0
5,109.9
ON Semiconductor Corporation stockholders’
equity:
Common stock
6.0
6.0
5.7
Additional paid-in capital
4,498.5
4,470.3
4,133.1
Accumulated other comprehensive loss
(48.6
)
(52.2
)
(57.6
)
Accumulated earnings
2,009.2
1,699.5
1,425.5
Less: Treasury stock, at cost
(2,341.4
)
(2,339.2
)
(1,968.2
)
Total ON Semiconductor Corporation
stockholders’ equity
4,123.7
3,784.4
3,538.5
Non-controlling interest
20.7
20.0
19.6
Total stockholders' equity
4,144.4
3,804.4
3,558.1
Total liabilities and stockholders'
equity
$
8,940.7
$
8,594.4
$
8,668.0
ON SEMICONDUCTOR
CORPORATION
UNAUDITED CONSOLIDATED
STATEMENT OF CASH FLOWS
(in millions)
Quarters Ended
Nine Months Ended
October 1, 2021
July 2, 2021
October 2, 2020
October 1, 2021
October 2, 2020
Cash flows from operating activities:
Net income
$
310.4
$
184.1
$
161.2
$
584.8
$
146.6
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
149.9
153.1
156.2
456.4
471.3
Loss (gain) on sale and disposal of fixed
assets
2.0
—
1.1
2.3
(1.8
)
Gain on divestiture of business
(10.2
)
—
—
(10.2
)
—
Loss on debt refinancing and
prepayment
—
26.2
—
26.2
—
Amortization of debt discount and issuance
costs
2.9
2.7
3.1
8.0
9.1
Share-based compensation
22.7
29.1
17.5
74.1
51.2
Non-cash interest on convertible notes
7.0
6.0
10.1
17.6
29.4
Non-cash asset impairment charges
3.3
1.4
7.0
10.8
14.2
Intangible asset impairment charges
—
—
—
—
1.3
Change in deferred tax balances
44.2
18.5
(136.8
)
39.5
(149.1
)
Other
0.2
2.0
3.5
0.2
5.3
Changes in assets and liabilities
(83.5
)
64.9
(59.5
)
(54.3
)
(93.6
)
Net cash provided by operating
activities
$
448.9
$
488.0
$
163.4
$
1,155.4
$
483.9
Cash flows from investing activities:
Purchase of Property, Plant and Equipment
("PP&E")
$
(93.2
)
$
(104.8
)
$
(61.6
)
$
(275.0
)
$
(267.2
)
Deposits and proceeds from sale of
PP&E
—
6.4
0.6
6.6
1.5
Deposits utilized (made) for purchase of
PP&E
(18.7
)
(2.4
)
1.8
(21.5
)
2.3
Divestiture of business, net of cash
transferred
3.4
—
—
3.4
—
Purchase of business, net of cash
acquired
—
—
—
—
(4.5
)
Purchase of available-for-sale
securities
(43.8
)
—
—
(43.8
)
—
Proceeds from sale or maturity of
available-for-sale securities
2.8
—
—
2.8
—
Settlement of purchase price from previous
acquisition
—
—
—
—
26.0
Net cash used in investing activities
$
(149.5
)
$
(100.8
)
$
(59.2
)
$
(327.5
)
$
(241.9
)
Cash flows from financing activities:
Proceeds for the issuance of common stock
under the ESPP
$
6.2
$
5.7
$
6.4
$
18.5
$
17.8
Payment of tax withholding for RSUs
(2.2
)
(3.5
)
(0.5
)
(34.2
)
(17.1
)
Repurchase of common stock
—
—
—
—
(65.4
)
Issuance and borrowings under debt
agreements
—
787.3
693.0
787.3
1,858.0
Reimbursement of debt issuance costs
—
2.7
—
2.7
—
Payment of debt issuance costs
(0.3
)
(3.5
)
(2.2
)
(3.8
)
(2.2
)
Repayment of borrowings under debt
agreements
(4.1
)
(1,060.6
)
(1,204.3
)
(1,218.8
)
(1,264.6
)
Payment for purchase of bond hedges
—
(160.3
)
—
(160.3
)
—
Proceeds from issuance of warrants
—
93.8
—
93.8
—
Payments related to prior acquisition
(0.7
)
(0.2
)
(2.8
)
(3.0
)
(8.3
)
Net cash provided by (used in) financing
activities
$
(1.1
)
$
(338.6
)
$
(510.4
)
$
(517.8
)
$
518.2
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(0.2
)
—
0.3
(1.0
)
0.4
Net increase in cash, cash equivalents and
restricted cash
298.1
48.6
(405.9
)
309.1
760.6
Beginning cash, cash equivalents and
restricted cash
1,092.5
1,043.9
2,060.7
1,081.5
894.2
Ending cash, cash equivalents and
restricted cash
$
1,390.6
$
1,092.5
$
1,654.8
$
1,390.6
$
1,654.8
ON SEMICONDUCTOR
CORPORATION
RECONCILIATION OF GAAP VERSUS
NON-GAAP DISCLOSURES
(in millions, except per share
and percentage data)
Quarters Ended
Nine Months Ended
October 1, 2021
July 2, 2021
October 2, 2020
October 1, 2021
October 2, 2020
Reconciliation of GAAP to non-GAAP
gross profit:
GAAP gross profit
$
720.8
$
640.1
$
441.2
$
1,882.1
$
1,218.2
Special items:
a)
Non-recurring facility costs
2.5
0.7
—
3.2
—
Total special items
2.5
0.7
—
3.2
—
Non-GAAP gross profit
$
723.3
$
640.8
$
441.2
$
1,885.3
$
1,218.2
Reconciliation of GAAP to non-GAAP
gross margin:
GAAP gross margin
41.4
%
38.3
%
33.5
%
38.5
%
32.0
%
Special items:
a)
Non-recurring facility costs
0.1
%
—
%
—
%
0.1
%
—
%
Total special items
0.1
%
0.1
%
—
%
—
%
—
%
Non-GAAP gross margin
41.5
%
38.4
%
33.5
%
38.5
%
32.0
%
Reconciliation of GAAP to non-GAAP
operating expenses:
GAAP operating expenses
$
321.6
$
357.9
$
322.2
$
1,074.8
$
1,037.5
Special items:
a)
Amortization of acquisition-related
intangible assets
(24.7
)
(24.8
)
(29.6
)
(74.5
)
(91.0
)
b)
Restructuring, asset impairments and
other, net
1.7
(17.5
)
(9.0
)
(58.3
)
(58.0
)
c)
Intangible asset impairment
—
—
—
(2.9
)
(1.3
)
d)
Third party acquisition and divestiture
related costs
(2.4
)
(1.4
)
—
(4.0
)
(0.3
)
Total special items
(25.4
)
(43.7
)
(38.6
)
(139.7
)
(150.6
)
Non-GAAP operating expenses
$
296.2
$
314.2
$
283.6
$
935.1
$
886.9
Reconciliation of GAAP to non-GAAP
operating income:
GAAP operating income
$
399.2
$
282.2
$
119.0
$
807.3
$
180.7
Special items:
a)
Non-recurring facility costs
2.5
0.7
—
3.2
—
b)
Amortization of acquisition-related
intangible assets
24.7
24.8
29.6
74.5
91.0
c)
Restructuring, asset impairments and
other, net
(1.7
)
17.5
9.0
58.3
58.0
d)
Intangible asset impairment
—
—
—
2.9
1.3
e)
Third party acquisition and divestiture
related costs
2.4
1.4
—
4.0
0.3
Total special items
27.9
44.4
38.6
142.9
150.6
Non-GAAP operating income
$
427.1
$
326.6
$
157.6
$
950.2
$
331.3
Reconciliation of GAAP to non-GAAP
operating margin (operating income / revenue):
GAAP operating margin
22.9
%
16.9
%
9.0
%
16.5
%
4.7
%
Special items:
a)
Non-recurring facility costs
0.1
%
—
%
—
%
0.1
%
—
%
b)
Amortization of acquisition-related
intangible assets
1.4
%
1.5
%
2.2
%
1.5
%
2.4
%
c)
Restructuring, asset impairments and
other, net
(0.1
)%
1.0
%
0.7
%
1.2
%
1.5
%
d)
Intangible asset impairment
—
%
—
%
—
%
0.1
%
—
%
e)
Third party acquisition and divestiture
related costs
0.1
%
0.1
%
—
%
0.1
%
—
%
Total special items
1.6
%
2.7
%
3.0
%
2.9
%
4.0
%
Non-GAAP operating margin
24.5
%
19.6
%
12.0
%
19.4
%
8.7
%
Reconciliation of GAAP to non-GAAP
income before income taxes:
GAAP income before income taxes
$
372.2
$
222.0
$
78.1
$
691.6
$
56.1
Special items:
a)
Non-recurring facility costs
2.5
0.7
—
3.2
—
b)
Amortization of acquisition-related
intangible assets
24.7
24.8
29.6
74.5
91.0
c)
Restructuring, asset impairments and
other, net
(1.7
)
17.5
9.0
58.3
58.0
d)
Intangible asset impairment
—
—
—
2.9
1.3
e)
Third party acquisition and divestiture
related costs
2.4
1.4
—
4.0
0.3
f)
Loss on debt refinancing and repayment
—
26.2
—
26.2
—
g)
Actuarial losses on pension plans and
other pension benefits
5.5
—
—
5.5
—
h)
Gain on divestiture of a business
(10.2
)
—
—
(10.2
)
—
i)
Non-cash interest on convertible notes
7.0
6.0
10.1
17.6
29.4
Total special items
30.2
76.6
48.7
182.0
180.0
Non-GAAP income before income taxes
$
402.4
$
298.6
$
126.8
$
873.6
$
236.1
Reconciliation of GAAP to non-GAAP net
income attributable to ON Semiconductor Corporation:
GAAP net income attributable to ON
Semiconductor Corporation
$
309.7
$
184.1
$
160.6
$
583.7
$
145.2
Special items:
a)
Non-recurring facility costs
2.5
0.7
—
3.2
—
b)
Amortization of acquisition-related
intangible assets
24.7
24.8
29.6
74.5
91.0
c)
Restructuring, asset impairments and
other, net
(1.7
)
17.5
9.0
58.3
58.0
d)
Intangible asset impairment
—
—
—
2.9
1.3
e)
Third party acquisition and divestiture
related costs
2.4
1.4
—
4.0
0.3
f)
Loss on debt refinancing and
prepayment
—
26.2
—
26.2
—
g)
Non-cash interest on convertible notes
7.0
6.0
10.1
17.6
29.4
h)
Actuarial losses on pension plans and
other pension benefits
5.5
—
—
5.5
—
i)
Gain on divestiture of a business
(10.2
)
—
—
(10.2
)
—
j)
Adjustment of income taxes
40.4
15.1
(97.5
)
41.7
(120.4
)
Total special items
70.6
91.7
(48.8
)
223.7
59.6
Non-GAAP net income attributable to ON
Semiconductor Corporation
$
380.3
$
275.8
$
111.8
$
807.4
$
204.8
Adjustment of income taxes:
Tax adjustment for special items (1)
$
(6.3
)
$
(16.1
)
$
(10.2
)
$
(38.2
)
$
(37.8
)
Impact of the Domestication of non-U.S. IP
and related effects (2)
—
—
(110.3
)
—
(110.3
)
Other non-GAAP tax adjustment (3)
46.7
31.2
23.0
79.9
27.7
Total adjustment of income taxes
$
40.4
$
15.1
$
(97.5
)
$
41.7
$
(120.4
)
Reconciliation of GAAP to non-GAAP
diluted shares outstanding:
GAAP diluted shares outstanding
440.7
443.6
418.3
443.1
414.4
Special items:
a)
Less: dilutive shares attributable to
convertible notes
(5.0
)
(8.6
)
(5.7
)
(8.9
)
(2.3
)
Total special items
(5.0
)
(8.6
)
(5.7
)
(8.9
)
(2.3
)
Non-GAAP diluted shares outstanding
435.7
435.0
412.6
434.2
412.1
Non-GAAP diluted earnings per
share:
Non-GAAP net income attributable to ON
Semiconductor Corporation
$
380.3
$
275.8
$
111.8
$
807.4
$
204.8
Non-GAAP diluted shares outstanding
435.7
435.0
412.6
434.2
412.1
Non-GAAP diluted earnings per share
$
0.87
$
0.63
$
0.27
$
1.86
$
0.50
Reconciliation of net cash provided by
operating activities to free cash flow:
Net cash provided by operating
activities
$
448.9
$
488.0
$
163.4
$
1,155.4
$
483.9
Special items:
a)
Purchase of property, plant and
equipment
(93.2
)
(104.8
)
(61.6
)
(275.0
)
(267.2
)
Total special items
(93.2
)
(104.8
)
(61.6
)
(275.0
)
(267.2
)
Free cash flow
$
355.7
$
383.2
$
101.8
$
880.4
$
216.7
(1)
Tax impact of non-GAAP special items (a-i)
is calculated using the federal statutory rate of 21% for all
periods presented.
(2)
The Company simplified its corporate
structure by repatriating the economic rights of its non-U.S.
intellectual property to the United States via domestication of
certain foreign subsidiaries (the "Domestication"). The
Domestication resulted in a benefit from recognizing certain
deferred tax assets, net of deferred tax liabilities, of $60.4
million. Additionally, the Domestication caused the Company to
reassess the full valuation allowance recorded against its U.S.
state deferred tax assets. As a result, the Company released
approximately $49.9 million of its valuation allowance recorded
against its U.S. state deferred tax assets.
(3)
The income tax adjustment primarily
represents the use of the net operating loss, non-cash impact of
not asserting indefinite reinvestment on earnings of our foreign
subsidiaries, deferred tax expense not affecting taxes payable, and
non-cash expense (benefit) related to uncertain tax positions.
Certain of the amounts in the above tables may not total due to
rounding of individual amounts.
Total share-based compensation related to restricted stock
units, stock grant awards and the employee stock purchase plan is
included below:
Quarters Ended
Nine Months Ended
October 1, 2021
July 2, 2021
October 2, 2020
October 1, 2021
October 2, 2020
Cost of revenue
$
3.6
$
4.9
$
3.1
$
11.8
$
8.5
Research and development
5.4
7.3
4.8
18.4
13.2
Selling and marketing
3.7
4.5
3.4
12.5
9.5
General and administrative
10.0
12.4
6.2
31.4
20.0
Total share-based compensation
$
22.7
$
29.1
$
17.5
$
74.1
$
51.2
SUPPLEMENTAL FINANCIAL DATA
Quarters Ended
Nine Months Ended
October 1, 2021
July 2, 2021
October 2, 2020
October 1, 2021
October 2, 2020
Net cash provided by operating
activities
$
448.9
$
488.0
$
163.4
$
1,155.4
$
483.9
Free cash flow
355.7
383.2
101.8
880.4
216.7
Cash paid for income taxes
21.4
20.9
5.6
65.1
15.5
Depreciation and amortization
$
149.9
$
153.1
$
156.2
$
456.4
$
471.3
Less: Amortization of acquisition-related
intangible assets
24.7
24.8
29.6
74.5
91.0
Depreciation and amortization (excl.
amortization of acquisition-related intangible assets)
$
125.2
$
128.3
$
126.6
$
381.9
$
380.3
NON-GAAP MEASURES
To supplement the consolidated financial results prepared in
accordance with GAAP, onsemi uses certain non-GAAP measures, which
are adjusted from the most directly comparable GAAP measures to
exclude items related to the amortization of intangible assets,
amortization of acquisition-related intangibles, expensing of
appraised inventory fair market value step-up, inventory valuation
adjustments, purchased in-process research and development
expenses, restructuring, asset impairments and other, net, goodwill
impairment charges, gains and losses on debt prepayment, non-cash
interest expense, actuarial (gains) losses on pension plans and
other pension benefits, third party acquisition and divestiture
related costs, tax impact of these items and certain other
non-recurring items, as necessary. Management does not consider the
effects of these items in evaluating the core operational
activities of onsemi. Management uses these non-GAAP measures
internally to make strategic decisions, forecast future results and
evaluate onsemi’s current performance. In addition, the Company
believes that most analysts covering onsemi use the non-GAAP
measures to evaluate onsemi's performance. Given management’s and
other relevant use of these non-GAAP measures, onsemi believes
these measures are important to investors in understanding onsemi's
current and future operating results as seen through the eyes of
management. In addition, management believes these non-GAAP
measures are useful to investors in enabling them to better assess
changes in onsemi's core business across different time periods.
These non-GAAP measures are not prepared in accordance with, and
should not be considered alternatives or necessarily superior to,
GAAP financial data and may be different from non-GAAP measures
used by other companies. Because non-GAAP financial measures are
not standardized, it may not be possible to compare these financial
measures with other companies’ non-GAAP financial measures, even if
they have similar names.
Non-GAAP Revenue
The use of non-GAAP revenue allows management to evaluate, among
other things, the revenue from the Company’s core businesses and
trends across different reporting periods on a consistent basis,
independent of special items. In addition, non- GAAP revenue is an
important component of management’s internal performance
measurement and incentive and reward process as it is used to
assess the current and historical financial results of the business
and for strategic decision making, preparing budgets, obtaining
targets and forecasting future results. Management presents this
non-GAAP financial measure to enable investors and analysts to
evaluate the Company's revenue generation performance relative to
the direct costs of operations of onsemi’s core businesses.
Non-GAAP Gross Profit and Gross Margin
The use of non-GAAP gross profit and gross margin allows
management to evaluate, among other things, the gross margin and
gross profit of the Company’s core businesses and trends across
different reporting periods on a consistent basis, independent of
non-cash items including, generally speaking, expensing of
appraised inventory fair market value step-up and non-recurring
facility costs. In addition, it is an important component of
management’s internal performance measurement and incentive and
reward process as it is used to assess the current and historical
financial results of the business and for strategic decision
making, preparing budgets, obtaining targets and forecasting future
results. Management presents this non-GAAP financial measure to
enable investors and analysts to evaluate our revenue generation
performance relative to the direct costs of revenue of onsemi’s
core businesses.
Non-GAAP Operating Income and Operating Margin
The use of non-GAAP operating income and operating margin allows
management to evaluate, among other things, the operating margin
and operating income of the Company’s core businesses and trends
across different reporting periods on a consistent basis,
independent of non-cash items including, generally speaking,
expensing of appraised inventory fair market value step-up,
non-recurring facility costs, amortization and impairments of
intangible assets, third party acquisition and divestiture related
costs, restructuring charges and certain other special items as
necessary. In addition, it is an important component of
management’s internal performance measurement and incentive and
reward process as it is used to assess the current and historical
financial results of the business and for strategic decision
making, preparing budgets, obtaining targets and forecasting future
results. Management presents this non-GAAP financial measure to
enable investors and analysts to evaluate the Company's revenue
generation performance relative to the direct costs of operations
of onsemi’s core businesses.
Non-GAAP Net Income Attributable to ON Semiconductor and
Non-GAAP Diluted Earnings Per Share
The use of non-GAAP net income attributable to onsemi and
non-GAAP diluted earnings per share allows management to evaluate
the operating results of onsemi’s core businesses and trends across
different reporting periods on a consistent basis, independent of
non-cash items including, generally, the amortization and
impairments of intangible assets, expensing of appraised inventory
fair market value step-up, non-recurring facility costs,
restructuring, gains and losses on debt prepayment, non-cash
interest expense, actuarial (gains) losses on pension plans and
other pension benefits, third party acquisition and divestiture
related costs, tax indemnification by third parties, tax impact of
these items and other non-GAAP adjustments and certain other
special items, as necessary. In addition, these items are important
components of management’s internal performance measurement and
incentive and reward process, as they are used to assess the
current and historical financial results of the business and for
strategic decision making, preparing budgets, setting targets and
forecasting future results. Management presents these non-GAAP
financial measures to enable investors and analysts to understand
the results of operations of onsemi’s core businesses and, to the
extent comparable, to compare our results of operations on a more
consistent basis against those of other companies in our
industry.
Free Cash Flow
The use of free cash flow allows management to evaluate, among
other things, the ability of the Company to make interest or
principal payments on its debt. Free cash flow is defined as the
difference between cash flow from operating activities and capital
expenditures disclosed under investing activities in the
consolidated statement of cash flows. Free cash flow is not an
alternate to cash flow from operating activities as a measure of
liquidity. It is an important component of management’s internal
performance measurement and incentive and reward process as it is
used to assess the current and historical financial results of the
business and for strategic decision making, preparing budgets,
obtaining targets and forecasting future results. Management
presents this non-GAAP financial measure to enable investors and
analysts to evaluate our revenue generation performance relative to
the direct costs of operations of onsemi’s core businesses.
Non-GAAP Diluted Share Count
The use of non-GAAP diluted share count allows management to
evaluate, among other things, the potential dilution due to the
outstanding stock options and restricted stock units excluding the
dilution from the convertible notes that is covered by hedging
activity up to a certain threshold. In periods when the quarterly
average stock price per share exceeds $20.72, the non-GAAP diluted
share count includes the anti-dilutive impact of the Company’s
hedge transactions issued concurrently with the 1.625% convertible
notes. As such, at an average stock price per share between $20.72
and $30.70, the hedging activity offsets the potentially dilutive
effect of the 1.625% convertible notes. In periods when the
quarterly average stock price per share exceeds $52.97, the
non-GAAP diluted share count includes the anti-dilutive impact of
the Company’s hedge transactions issued concurrently with the 0%
convertible notes. As such, at an average stock price per share
between $52.97 and $74.34, the hedging activity offsets the
potentially dilutive effect of the 0% convertible notes.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211101005247/en/
Stefanie Cuene Head of Public Relations onsemi (602)
244-3402 stefanie.cuene@onsemi.com
Parag Agarwal Vice President - Investor Relations &
Corporate Development onsemi (602) 244-3437
investor@onsemi.com
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